Cash for access row: Just what is in it for Britain, Mr Blair?

Philip Johnston examines the accusations surrounding the Prime Minister's support for a Labour Party donor

12:01AM GMT 12 Feb 2002

"THE facts are these: a British company wins a contract and opens up a new market. That should be a matter for celebration."

With this characteristically aggressive statement, Downing Street sought yesterday to close down the latest "sleaze" controversy to assail the Blair Government.

The suggestion that the Prime Minister wrote to his Romanian counterpart, Adrian Nastase, about the takeover of an ailing state-owned steel plant because the prospective buyer contributed £125,000 to Labour funds was dismissed with withering contempt.

Not only was Mr Blair asked to intervene by Richard Ralph, Britain's ambassador to Bucharest, it was, officials said, a "perfectly normal" thing to do.

And so it is. Mr Blair and his predecessors have often pressed the case of British industry overseas. Some have even taken industrialists on foreign visits, the more easily to open doors on their behalf. Huge contracts have been signed as a result, safeguarding thousands of jobs.

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However, the problem for Downing Street is that by no stretch of the imagination could LNM, the world's fourth largest steel conglomerate, be called a British company.

Apart from the fact that Lakshmi Mittal, its founder and chairman, lives in London with his wife, Usha, its connections with this country are pretty tenuous.

One of its subsidiaries, Kent Wire, based in Chatham, employs about 60 people importing steel from Germany to be cut into mesh. Another small subsidiary, Ispat Shipping Ltd, based in London, carries out the group's shipping activities.

The principal link to Britain is through LNM's corporate headquarters in Berkeley Square, London, where there is a staff of around 25. The main reason why the corporate HQ is in Britain is because London is an international financial centre and is well placed for the world's different time zones.

But Ispat International, the group's steelmaking arm, is registered in Rotterdam and is floated on stock exchanges in Amsterdam and New York.

LNM Holdings, the Mittal private company that bought Sidex, the Romanian steel plant, is registered in the Dutch Antilles, a Caribbean tax haven, though there is a UK-registered company that owns part of it.

Across the world, the LNM group employs 75,000 people and has annual revenues of £4 billion. Yet the British end involves, at most, around 100 people. Nor is Mr Mittal, known as the "Calcutta Carnegie", a British citizen, though he lives in a £10 million home in Hampstead, called the Summer Palace.

Born in India, he came to London in 1995 from Indonesia. He told one interviewer that he spends 10 days a month in Britain and the rest between Asia, America and Europe.

It is, then, a fair question to ask why Mr Blair felt it necessary to write to Mr Nastase, and why the ambassador asked him to. Mr Ralph was even on hand to witness the signing ceremony when LNM became the owners of Sidex last July.

Mr Vaz, who launched a UK/Romania action plan in March last year, also had connections with the Mittals. In 1997, he was given £5,000 towards his election expenses by Mrs Mittal.

Adam Price, the trade and industry spokesman for Plaid Cymru, has tabled a series of questions to Mr Blair asking why he felt it necessary to become involved in the Sidex deal, even though it had apparently already been concluded. He has also asked for the Government's definition of what constitutes a British company. "The only sense in which this is a British business is that the owner has a house in Hampstead," he said yesterday.

All the principal players are bemused by the controversy. Claudiu Lucaci, a spokesman for the Romanian government, denied that the Blair letter had any influence on the negotiations. He called it a "gesture" and "an encouraging act for the continuation of the reform and reorganisation process of the Romanian economy".

Annanya Sarin, the head of corporate communications for LNM, also dismissed any link. She pointed out that American and Indian diplomats were also at the Sidex privatisation signing ceremony.

Another accusation is that Mr Blair was siding with a major competitor of British steel interests; yet there is little evidence to back it up.

In the first 11 months of last year, only 36,000 tons of steel were imported into the UK from Romania out of a total of seven million tons.

Ian Goldsmith, a spokesman for Corus, the Anglo-Dutch amalgamation of the former British Steel and Hoogovens, said LNM was not one of their major competitors.

"There are some products where we compete, but it is a pretty small part of the business," he said. Corus last year announced thousands of lay-offs and has imposed a pay freeze but its problems have been blamed on the weakness of the euro and strength of the pound as well as cheap Asian imports.

The steel unions - which might be expected to complain loudest if the government was backing a foreign competitor - yesterday backed Mr Blair. The Iron and Steel Trades Confederation accused Plaid Cymru and the Tories of playing "cheap politics" ahead of Thursday's Ogmore by-election.

The ISTC's position, of course, had nothing to do with the fact that it donated £30,000 to Labour's pre-election coffers.